Good day and thank you for standing by. Welcome to the StoneX Group Inc. Q1 Fiscal Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Bill Dunaway, CFO. Please go ahead.

Good morning. My name is Bill Dunaway. Welcome to our earnings conference call for our first quarter ended December 31, 2021. After the market closed yesterday, we issued a press release reporting our results for the first fiscal quarter of 2022. This release is available on our website at www.stonex.com, as well as a slide presentation which we’ll refer to on this call and our discussions of our quarterly results. You will need to sign onto the live webcast in order to view the presentation. The presentation and an archive of the webcast will also be available on our website after the call’s conclusion. Before getting underway, we are required to advise you and all participants should note that the following discussion should be taken in conjunction with the most recent financial statements and notes thereto, as well as the Form 10-Q filed with the SEC. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements involve known and unknown risks and uncertainties which are detailed in our filings with the SEC. Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the company’s actual results will not differ materially from any results expressed or implied by the company’s forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance. With that, I’ll now turn the call over to Sean O’Connor, the Company’s CEO. Sean O’Connor: Thanks, Bill. Good morning everyone…

Thank you, Sean. I'll be starting with Slide number 8 which shows our consolidated income statement for the first quarter of fiscal 2022. Sean covered many of the consolidated highlights for the quarter, so I would just highlight a few and then move on to a segment discussion. Transaction based clearing expenses were up 8% to $70.9 million in the current period, primarily due to higher clearing and ADR conversion fees within the equity capital markets resulting from the increase in average daily volumes in that business. Introducing broker commissions were relatively flat with the prior year at $38.3 million in the current period. Interest expense increased $5.8 million versus the prior year, primarily due to an increase in activity in our institutional fixed income dealer, higher average borrowings on short term financing facilities of our subsidiaries, and an increase in securities lending activities. Variable compensation increased $16.1 million versus the prior year and represented 32% of net operating revenues comparable to 33% of net operating revenues in the prior year period. Fixed compensation increased $5.3 million versus the prior year with the growth of principally related to salary and benefit costs have increased headcount, along with a $900,000 increase in share based compensation. Other fixed expenses increased $12.4 million to $86.5 million; however we were relatively flat with the $86.7 million in the immediately preceding quarter. As compared to the prior year, trading system and market information increased $2.4 million and non-train technology and sport increased $2.1 million as part of our initiative to expand our digital offerings. In addition, professional fees and selling and marketing expenses increased $2.6 million and $2.2million respectively. Finally, we have started to see increases in travel and business development increasing $1.9 million as compared to the prior year. We had a net recapture…

Thank you.[Operator instructions] Our first question comes from the line of Dan Fannon from Jefferies. Your line is now open.

Hey, thanks. Good morning. Sean O’Connor: Morning, Dan.

I guess, maybe just starting with rates and the swap that you talked about, maybe I guess some context around the rationale for doing that. I guess the cost associated with it. And I think you mentioned retaining the upside as rates go higher, but just want to make sure I understand the mechanics of this versus just kind of the normal course of reinvesting your balances. Sean O’Connor: Yes. So a couple points here. So we, we did this very successfully about four or five years ago, where we landed into the two year rates, which gave us an enhancement of the short term rates when rates were low, at that time. We do it in a very disciplined way, we sort of look at it every quarter. And with the current setup here, and with interest rates, having moved so aggressively in late December, we decided we would sort of implement that same process. And the methodology we look at is we, we basically look at a portion of our total balance, and then we say, what rate can we lock in now? And what earnings would we get over a two year period, versus if the Fed did what it says it's going to do. And if that calculus shows us that with certainty, we can achieve a better result at that point in time, we think it's prudent to do that, because we immediately start earning at higher rates, instead of waiting three, four or five quarters, we start earning that rate. Now, if the Fed is more aggressive with its rate increases obviously on the back end, you may have an opportunity cost, but you certainly lock into a fixed rate over that two year period. So when we did that calculus, it was positive.…

That's very helpful. Okay, no that does make sense. And I guess, as you think about the incremental benefit of not only that, but just higher rates in general, and the sensitivity that you put forth in slide 15 and it’s been there for some time. The incremental margin that we should think about at the corporate level, in terms of compensation, or there's obviously not a lot of expense tied to this, but we should think about this is very high incremental margin revenue coming through to your returns and overall profitability, correct? Sean O’Connor: Yes, absolutely. We have no payoffs to our teams on that. So that goes straight to the pretax line. Obviously, to the extent that impacts ROE, they will be added compensation to the executive team, if ROE goes up, because we are ROE base, but it's a very small drag on from that compensation provides on that. So it's a very high margin, revenue source. And I think people don't really understand, if you look in the context of $1.7 billion in top line revenue and just doing the math off the top of my head, if you get 1%, on 6 billion, it’s 60 million. 60 million doesn't sound that important in the context of 1.7 billion, but its 60 million to the pretax line, pretty much, right. So it's, it's very important to lots of leverage on that.

Right, right. Makes sense. And if we think about, I mean, the context of the business in the quarter, and to start the year global payments continues to, or certainly had a very good kind of quarter. I think you mentioned… Sean O’Connor: Yes, record quarter…

Recognition of gender and place? Sean O’Connor: Yes.

And so just a little bit more context on the momentum in that business that we think about what's I don't want to say normal, but the kind of if there's any seasonal components or things that maybe this is a good as you think about the health of that business, is this, is it building from here? Or is it or there may be, this excuse me, this past quarter was a bit elevated versus what you might consider normal. Sean O’Connor: No, I think this quarter was what I was considered to be normal. I mean, there is definitely seasonality in our global payments business. If you look back on it, the third quarter, so there's a sorry, the fourth quarter for us, the September quarter is typically a weak quarter for us. That's sort of summer holidays in Europe, and just a lot of people just go away don’t do anything. So we always find that the September quarter is probably the weakest of the four. And then we find that the Q1, which is the quarter we just reported on the December quarter, is normally the strongest because there's a little bit of a catch up after the weak Q3. So we seem to see that catch up, happen almost every year. So there is seasonality, and that comes largely from the NGO, part of our business less so from our banks. So I would say that's, that's to answer your seasonality question. The global payments, business are an incredible franchise. I mean, we make payments around the world for 15 of the largest banks in the world, and probably another 200 midsize banks around the world. I mean, we are almost systemic to some of these, these countries, in terms of how much money we…

Yes, that does, thank you. And I guess this Bill is a follow up on in terms of expenses and other kind of notable items in the quarter. I think he talked about, there wasn't anything, I guess, that stood out materially in debt [ph] that was obviously quite smaller, or actually a positive. But anything as we think about the remainder of this year, we just walked through kind of global payments and some of the investments there but other sub segments, or either at the corporate level, or the segment level that we should think about that might have different run rates than what we saw here in the December period. Sean O’Connor: Bill, why don't you take that?

Sure, nothing, nothing material than that. I do think that, we'll probably continue to see, non-variable comp creep up a little bit from where it is now as we continue to kind of expand that digital offering, but not substantially. And the only other thing I would notice, as Sean touched is going to be more in the interest expense lines as we've talked about quite a bit. We are going to be looking to, to refinance, the debt we put on when we did this, the game capital acquisition. So there'll be some we hope, some significant changes there to the interest expense line on a go-forward basis. But outside of that, the like, the last thing of note here is that I would say, we have seen kind of sequentially even quarter-over-quarter some increases in travel and business development, as we've had an ebbs and flows and COVID. Offices opening and clients being more willing to see us, kind of has come and gone several times, but I think we're starting to see that go up. We do have some big conferences, planned coming up here. So, we'd expect to see some of those travel and business development costs go up, you'll see, we've put out some press releases on our global market outlook here at the beginning of March, which is something we do bi-annually. And so it's something that is a relatively big event for us. So I would expect to see some travel and business development increases, but outside of that, and interest and nothing else of note, I would say, Dan, that jumped out at me. Sean O’Connor: I would probably say one other thing that we did, I think speak to that, we would see our sort of fixed cost component, decline over sort of two years of quite strong growth. Some of that was gain. And some of that was sort of spinning up, sort of our technology teams and so on. We did plan for an increase this year and a more modest increase. It's, it's challenging, filling those spots. So, what we may see is something some of that costs sort of being back into the little bit into the year just because of the challenges around hiring people. So, in aggregate, I don't think it's going to be anything different than we planned. It's just probably not going to happen sort of evenly over the quarter as we had planned. So just challenging.

Right? Okay. And then just Sean, as you think about the environment today, and the firm being acquisitive over time, but listening to your prepared remarks, lots of organic and opportunities, and you just mentioned the TAMs and where you are. So the inorganic versus organic kind of -- the kind of focus in this type of backdrop is do you see M&A is attractive in the current backdrop versus, some of the internal kind of opportunities you have ahead? Sean O’Connor: Yes, I think we've always, we've always prided ourselves on having a good and profitable business that has strong organic growth. And that's always been our number one, criteria, as many acquisitions that we've done. We've never sort of set out to go acquire businesses. It's been much more opportunistic. And our number one goal is to leverage the capabilities we have and I don't think we've ever seen an environment and a situation we have so much opportunity to capitalize on internally. The good news of that is it allows you to be very disciplined around acquisitions, right? Because, we've got lots to keep us busy and lots of ways we can grow our business. And therefore, we are only going to do something on the acquisition side, if it really fits, its priced right, and so on. So I think it's allowed us to be very disciplined. And we don't like to overpay, we'd like to buy businesses we can add value to. And I think we've done that pretty successfully. So in this environment, we have a situation where I think we've got some enormous opportunities on the sort of organic growth side that you don't want to necessarily take our eye off the ball unless the price is big. And then on the acquisition side, it feels to me that everything's overpriced. So I think that environment, it's probably unlikely we're going to do anything meaningful. But as soon as I say that, something will kind of happen, potentially. But I honestly think it's probably a lower probability than it has been in the past that we'll see something on the acquisition side, just because I think prices are way high. It's probably not the right time to buy the kind of businesses we look at. And at the same time, we just got lots of not really good stuff to do internally.

Great. Well, thanks for taking all my questions. Sean O’Connor: Yes, of course.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Sean O'Connor, CEO for closing remarks. Sean O’Connor: Well, thanks again, everyone for joining us. And we look forward to speaking to you in three months or so. So thanks for your interest and goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.